March 10, 2011

The Hype About Cloud Computing is Wrong! John Hagel Explains Waves of Disruption at Cloud Connect

by Cary J. Calderone

This week was my first time visiting the Cloud Connect event in Silicon Valley. The event offered a great selection of tracks and speakers. Some speakers came from established companies that are trying to be leaders in the Cloud (Microsoft, Amazon), and others came from new Cloud companies.   Opinions and projections were delivered in a variety of formats. For example, unlike typical single-speaker Keynotes, Tuesday included 10 different speakers, most of whom gave quick 10-minute presentations.   The Wednesday Cloud Industry Summit presentation by John Hagel (another bio), one of the most respected technology thought leaders in the history of Silicon Valley, had no PowerPoint slides, and lasted only 20 minutes.   But that was plenty of time for Mr. Hagel to explain the disruptive nature of the Cloud and to make his most important point.  He believes the current "hype" about the Cloud is wrong.   "We have underestimated the impact!"

In this short talk he outlined a condensed or, "CliffsNotes" version of his full working paper, "Cloud Computing, Storms on the Horizon." In brief, Hagel presented three ways the Cloud is disrupting business:
  1. Economies of Innovation
  2. Economies of Growth
  3. Enterprise Economics
The Economies of Innovation are now different with the Cloud. Instead of the old innovation model, with large up front costs and long lead times (while still facing the ultimate question, "will it work?"), the new Cloud model provides companies with the potential to innovate with much lower costs. The infrastructure is already in the Cloud, and with the "pay per use" model, it is less expensive to get started, to test, and ultimately, to expand.  New innovations can be tested faster, cheaper, and even in parallel.

Once you find a new idea that works, the Economies of Growth allows you to adopt it and scale it up faster and easier than ever before.   A big strength of the Cloud is that it provides virtually unlimited capacity for expansion.  You do not have to build data centers and expand network bandwidth to keep up, it is already there and available.   You simply add users.  Hagel gave examples of companies, like Rearden Commerce, Inc., that have used the Cloud, and specifically the Cloud's incredible computing power, to combine service offerings, that in the past, could not have been cost-effectively combined.  Under the old model, frequently there was insufficient overlap and revenue potential to justify the extra cost and resources necessary to bring in content and features from disparate systems.   In the case of Rearden, it provides a Personal Assistant feature that gives location-based  information for airlines, hotels, restaurant, car service, parking, meetings, and communications channels, all on your smartphone.  It does the work of aggregating the information from unconnected sites, collects and filters it with your specific needs and preferences, and delivers it to you.  

Third, the Cloud provides an Enterprise Economics advantage.  An enterprise can pull apart its business units and can better focus and redistribute resources.   In regulated industries, like Finance and Healthcare, they can rely on Clouds with service grids that meet the pre-determined standards for data control.   This frees the business to focus their resources in other ways, and, with perhaps, more and better innovation to their service offerings.    

Mr. Hagel did briefly cover a fourth, and the most obvious disruption, the restructuring of the IT industry. This disruption brings about lower costs and different ways in which IT services can and will be delivered.  It is the main reason that every corporate CIO is currently considering Cloud offerings.

How can this affect your DRED projects?  How may the Cloud disrupt data retention and information management?  We could and should see a fundamental change. Instead of having to organize and manage data for a particular sector, like the Health Industry, and then considering the Cloud as a place to store the data, we may end up simply moving it to a Health Cloud Data provider.  Ideally, the data will be safely stored according to the rules and there will be infinitely more network, storage, and processing capabilities available to crunch the data.  This Cloud-enabled capability to use and protect the data will far exceed that of any one individual company, especially if you are a small or mid-sized one.

On balance, my blog post of Mr. Hagel's condensed talk does not do it justice.  I urge you to read the full working paper (available here).   The disruptions are explained in much better detail.  In comparing this talk synopsis to the complete paper, I believe my description of a "CliffsNotes" version above, was spot on.  

Hagel's last bit of advice was to Cloud providers and all C-level executives. You need to talk. The Cloud offerings and potential for innovation have to be reviewed by all the executives, and not just the CIO.   The Cloud economies mean most businesses cannot just continue with "business as usual."  You either disrupt, or you will be disrupted.

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